Prior appropriation water rights are established on the appropriation doctrine developed in Western states. These water rights are different from riparian water rights, which are applied in eastern states. In the western states, water supplies are very limited and must be allocated sparingly based on the productivity of its use. The right is also allotted to those who are “first in time of use”

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The appropriation doctrine originated in California around the time of the Gold Rush where miners were looking for ways to increase the amount of water available for mining operations. The Irwin v. Phillips case is what brought the water appropriation problems to light at this time. Matthew Irwin diverted a stream for his mining operation. Shortly after, Robert Phillips started a mining operation downstream and eventually tried to divert the water back to its original streambed. This case was taken all the way to the California Supreme Court where the court ruled in favor of the appropriation law.

The legal details vary from state to state; however, the general principle is that water rights are unconnected to land ownership, and can be sold or mortgaged like other property. These rights can be lost over time if non-use of the water source is demonstrated or if the water has not been used for a certain number of years. [1]

There are four essential elements: intent, diversion, beneficial use, and priority. The first person to use a quantity of water from a water source for a beneficial use has the right to continue to use that quantity of water for that purpose. Subsequent users can use the remaining water for their own beneficial purposes provided that they do not impinge on the rights of previous users; this is the priority element of the doctrine. In addition to this, a user may not change the intent in which he is appropriating water such that the change hinders the use by another. [2] These Preservation of Conditions were granted to the second user after Farmers High Line v. City of Golden (CO 1954).

Beneficial use is commonly defined as agricultural, industrial or household use. Ecological purposes, such as maintaining a natural body of water and the wildlife that depends on it, were not initially deemed as beneficial uses in some Western states but have been accepted in some jurisdictions. The extent to which private parties may own such rights varies among the states.[3]

Each water right has a yearly quantity and an appropriation date. Each year, the user with the earliest appropriation date (known as the "senior appropriator") may use up to their full allocation (provided the water source can supply it). Then the user with the next earliest appropriation date may use their full allocation and so on. In times of drought, users with junior appropriation dates might not receive their full allocation or even any water at all.

When a water right is sold, it retains its original appropriation date. Only the amount of water historically consumed can be transferred if a water right is sold. For example, if alfalfa is grown, using flood irrigation, the amount of the return flow may not be transferred, only the amount that would be necessary to irrigate the amount of alfalfa historically grown. If a water right is not used for a beneficial purpose for a period of time it may lapse under the doctrine of abandonment. Abandonment of a water right is rare, but occurred in Colorado in a case involving the South Fork of San Isabel Creek in Saguache County, Colorado.[4]

For water sources with many users, a government or quasi-government agency is usually charged with overseeing allocations. Allocations involving water sources that cross state borders or international borders can be quite contentious, and are generally governed by federal court rulings, interstate agreements and international treaties.

Even though water markets are increasingly gaining ground, many have criticized the prior appropriation system for failing to adequately adjust to society's evolving values. For example, the vast majority of water in the West still is allocated to agricultural uses despite the cries for additional water from growing cities. Additionally, the high demand for the allocation of water can cause an over-appropriation of the waters. This means that there are more water rights for that particular stream than there is water actually available.[5] For example, in Nevada, approximately 45 basins are over-appropriated.[6] Similarly, environmentalists and those who use rivers for recreational and/or scenic purposes have demanded that more water be left in rivers in streams. The prior appropriation system has in many ways inhibited these calls for change.[7]

California and Texas recognize a duel doctrine system that employs both riparian and prior appropriation rights. Oregon mainly uses the prior appropriation doctrine with some remnants of the riparian doctrine.[9] Landowner’s have rights to water on their own land at a certain time at which it is then incorporated into the appropriation system. [10]

In these cases, riparian rights take precedence, unless they are not claimed by a certain date or are not used within a certain number of years. [11]

Arizona adopted the prior appropriation doctrine such that a person could acquire this water right simply be applying it to beneficial use and posting an appropriation notice the point of diversion. On June 12, 1919, they enacted the Public Water Code in which the person must apply for and obtain a permit for water use. [12]

The appropriation doctrine was adopted in Colorado in 1872 when the territorial court ruled in Yunker v. Nichols, 1 Colo. 552 (1872), that a non-riparian user who had previously applied part of the water from a stream to beneficial use had superior rights to the water with respect to a riparian owner who claimed a right to use of all the water at a later time. The question was not squarely presented again to the Colorado Court until 1882 when in the landmark case, Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882), the court explicitly adopted the appropriation doctrine and rejected the riparian doctrine, citing Colorado irrigation and mining practices and the nature of the climate. The decision in Coffin ruled that prior to adoption of the appropriation doctrine in the Colorado Constitution of 1876 that the riparian doctrine had never been the law in Colorado.[13][14] Within 20 years the appropriation doctrine, the so-called Colorado Doctrine, had been adopted, in whole or part, by most of the states in the Western United States that had an arid climate.[15]

New Mexico enacted its appropriate Surface-Water Code in 1907. Later, in 1931, New Mexico enacted the Underground Water Law that adapted the state’s surface law to ground water.[16]

The prior-appropriation doctrine was adopted in 1973 in Montana under the 1973 Water Use Act. Later, they then passed the Montana Ground Water Assessment Act in 1991.[17]

In 1967, Texas passed the Water Rights Adjudication Act in regards to surface waters such that the allocation of these waters was under a unified permit system. [18]

Water is not the only public good that has been subject to prior appropriation. The same first in time, first in right theory has been used in the United States to encourage and give a legal framework for other commercial activities.

The early prospectors and miners in the California Gold Rush of 1849, and later gold and silver rushes in the western United States, applied appropriation theory to mineral deposits. The first one to discover and begin mining a deposit was acknowledged to have a legal right to mine. Because appropriation theory in mineral lands and water rights developed in the same time and place, it is likely that they influenced one another. This was seen in the California case Irwin v. Phillips, 5 Cal. 140 (1855) which decided a water rights dispute between two non-riparian miners on the basis of "first in time, first in right", a maxim drawn from equity.[19] As with water rights, mining rights could be forfeited by nonuse. The miners codes were later legalized by the federal government in 1866, and then in the Mining Law of 1872.

The Homestead Act of 1862 granted legal title to the first farmer to put public land into agricultural production. This first in time right to agricultural land may have been influenced by appropriation theory applied to mineral lands.

In recent years, there has been some discussion of limiting air pollution by granting rights to existing pollution sources. Then it has been argued, a free cap and trade market could develop in pollution rights. This would be prior appropriation theory applied to air pollution. Recent concern over carbon dioxide and global warming has led to an economic market in CO2 emissions, in which some companies wish to balance emissions increases by offsetting decreases in existing emissions sources. This is essentially acknowledging a prior appropriation right to existing CO2 emitters.